Adding Value and Volume to the Hospitality Ecosystem of India

TOURISM IN India accounts for 9.6 percent of the GDP. Just last year, foreign tourist arrival surpassed 10 million, as compared to 5.1 million in the year 2007. In the next seven years, we as a nation are targeting to capture two percent of the global market share of travel and tourism, which is less than one percent at present. But the same time we have only 0.22 million-hotel rooms available in India to accommodate tourists. This number is quite low in comparison to our peers like the USA, that has 5 million rooms, and China that has 2.7 million rooms. To achieve sustainable GDP growth and to be a prominent player on the global tourism canvas as we envision being, a robust hospitality infrastructure is required as one of the most critical aspects.

We conducted a study on the domestic business travel pattern of the SME segment. There are 388 industrial clusters in our country and the majority of them have very few quality rooms inventory supply, which discourages SME business travellers to travel or to stay overnight in these markets. Today, what the hospitality industry needs is that tinge of creativity that adds an intangible value to tangible hotel assets, which will encourage budding entrepreneurs to build more hotels. To tackle this problem, the gap between what is there and what is needed is required to be bridged by deep analytical research to generate great insights about the Indian hospitality industry. Data speaks volumes and one needs to listen carefully, understand it thoroughly and apply it practically. It is not as easy a task as it seems as entire consultancies are dedicated to just providing the hotel owners and investor the guidance in making right decisions for their fresh investments basis extensive research and analysis. This data can also be immensely vital in providing solutions to improve yields for one’s existing hotel investments, working all the while very closely with all the stakeholders.

When a deep dive in the space of hospitality consulting was undertaken, it was concluded that 85 percent of Indian hotel rooms inventory falls under the unorganized category, which means, standalone hotels or unbranded hotel. Four major problems were associated with this situation-

* Lack of quality staff

* Lack of standard operating procedures

* Unsatisfactory hotel upkeep and maintenance

* Weak sales and marketing network

From the same, major under-construction hotels’ key issues were also identified- Design and planning, limited technical hands-on knowledge to build a hotel, bad debt structuring and in the majority of cases no professional feasibility study was conducted before initiating the investment on a project.

All this was gathered from the data which was not just speaking; it was lamenting the sad state of Indian hospitality sector. Considering this gap analysis generated step by step over these years with astounding insights has led to the conclusion that expert advice by professional consultants can make a stark difference in determining the success of a hospitality project before taking it forward.

It is vital to entrust a professional to provide assistance in the research as well as the execution part of the hospitality dealings. Feasibility studies, research and advisory, project management, transaction management, hotel operator/brand selection, debt syndication and private equity are essential factors which need to be dealt with expertise. If a professional feasibility study is conducted before investing in a project, it increases the chances of having branded hotel operator at the planning stage. Then the role of project management team comes into play to control project cost, to meet the construction timelines and to have quality control check. Debt structuring includes tenure, interest, repayment schedule and moratorium. It becomes easier to handle this part of the investment with the help of professional support as one can also figure out the alternate cost-effective source of finance to improve project profitability.

The role of a leading hospitality consultancy cannot be undermined as marked results in hotel investment yield have been witnessed with their support. It is a documented fact that consultancies have played a critical role in improving the organized rooms’ inventory share in last few years, which was 15% in the year 2009, and today stands at 30%. It has been observed that migration of existing rooms’ inventory from unorganized to the organized sector works best by convincing hotel owners to appoint professional branded hotel chain to operate their hotel/s and simultaneously to invest in their hotel to upgrade the facilities. This conviction can only be provided when one has done their research utilizing relevant tools, to arrive at irrefutable analysis and case studies on how such decisions can turn around asset profitability and its valuation. These successful transactions add value to all the stakeholders involving hotel owners, financial institutions, employees, hotel guests, vendors and government. With every new addition of hotel inventory to the organized segment, one more step is being taken for the creation of a robust hospitality ecosystem of the nation.